Friday, 18 July 2008

Stakeholders Include Shareholders, Mr Kamp!

Now a days it is quite common to talk about concepts such as "stakeholders" and "corporate social responsibility (CSR)". However, the criticism that these concepts has received historically is often misinformed. For example, in the famous Berle-Dodd debate, Professor Berle suggested that CSR might make the corporate management absolute. As we know, this proved baseless, for the contention was unsound. Similarly uninformed were the arguments of Milton Friedman that corporations would in effect be imposing "tax" on stockholders if they pursued CSR policies, or that CSR was a Marxist/socialist tool to undermine free market economy and capitalism.

The recent Monitor column of Jake van der Kamp in South China Morning Post("Airport returns just flights of fancy for taxpayers?", 27 June 2008) is a telling example of this continued misinformed critique of stakeholders and/or CSR. By referring to the "Dear Stakeholders" opening address of the Chairman of the Hong Kong Airport Authority in the Annual Report of the Authority, the author suggested as if the Chairman was "responsible to the customers, the emplyees and the suppliers, but not to you [shareholders]". However, stakeholders do include shareholders. As per a seminal definition offered by Freeman, a stakeholders is who "can affect or is affected by the achievements of the organisation's objectives". So, the responsibility to stakeholders does not exclude responsibility to shareholders.

Perhaps, Mr Kamp might not have made such an erroneous assertion had he read carefully the very first paragraph of the chairman's statement, wherein it was mentioned that out of the profit amount of HK$2.3 billion, "HK$2 billion will be returned to our shareholders".

It is also not appropriate to suggest that only shareholders contribute to the success of a company. Let us take the case of Airport Authority itself. Is the Hong Kong airport one of the best merely because of its shareholders (the HKSAR government)? I doubt if this is the case, because saying so greatly discounts the role that other stakeholders such as employees, suppliers, contractors and travellers play in making the airport what it is.